Consider a 15 percent increase in the price of a box of 50 of mailing envelopes and a 15 percent increase in the price of designer leather goods. In response to the price changes, which of the following is most likely to be true?
A)The total revenue from designer leather goods will not change.
B)The percentage change in the quantity demanded of designer leather goods will be approximately equal to the percentage change in the quantity demanded of a box of 50 mailing envelopes.
C)The percentage change in the quantity demanded for a box of 50 of mailing envelopes will be larger than the percentage change in the quantity demanded for designer leather goods.
D)The percentage change in the quantity demanded for designer leather goods will be larger than the percentage change in the quantity demanded for a box of 50 of mailing envelopes.

Question

Quizplus · Accepted Answer

The percentage change in quantity demanded for a good is inversely proportional to the price elasticity of demand for that good. Designer leather goods are likely to have a higher price elasticity of demand than a box of 50 mailing envelopes. Therefore, the percentage change in the quantity demanded for designer leather goods will be larger than the percentage change in the quantity demanded for a box of 50 of mailing envelopes. Option A is incorrect because the total revenue will change with the increase in price. Option B is incorrect as there is no information to support it. Option C is incorrect because the percentage change in quantity demanded for mailing envelopes may be small due to their necessity for businesses and individuals.

Consider a 15 Percent Increase in the Price of a Box